SUMMARY OF WHAT’S HAPPENING WITH MORTGAGE RATES ACCORDING TO BBC NEWS
FROM THE ARTICLE ‘Warning UK mortgage rates set to rise further’
https://www.bbc.co.uk/news/business-65876570
mortgage rates are again set to increase in the UK
So what exactly is going on with the current news around mortgages? [information from BBC news]
Mortgage rates are going up because the market is uncertain, and borrowers are being warned about it.
Lenders are taking away mortgage deals and increasing rates quickly, and this is expected to continue.
In the past month, mortgage rates have gone up by about 0.5%, reaching an average of 6% for fixed deals.
Santander and NatWest, two big lenders, have temporarily stopped offering new deals and announced higher rates.
About 1.5 million households who are transitioning from fixed mortgage deals this year may have to pay much more every month.
The increase in rates is influenced by UK inflation, which is not decreasing as fast as expected.
It is predicted that the Bank of England may raise interest rates up to 5.5%.
HSBC recently stopped and then restarted offering new mortgage deals, but with higher rates for fixed residential and buy-to-let mortgages.
Because of changes in the market, lenders have changed their deal prices, and people looking for cheaper rates are facing a lot of competition.
The average two-year fixed-rate mortgage deal is now 5.86%, and a five-year deal is 5.51%, which is much higher than last year.
When borrowers' fixed term ends, they usually go to their lender's standard variable rate, which can be much more expensive.
The CEO of HSBC, Ian Stuart, is worried and expects interest rates to go up more, which will affect customers' budgets.
Landlords are feeling the pressure of rising mortgage rates, and some may decide to sell their properties, which could affect the availability and cost of renting.
What is a mortgage?
A mortgage is a loan given by a financial organisation, usually a bank or lender, to assist people or companies in buying real estate
It's a kind of secured loan where the asset being bought serves as collateral
The borrower, often referred to as the mortgagor, receives a certain sum of money up front and consents to pay back the loan over a predetermined period, typically in monthly installments, plus interest
The property is used as security for the mortgage, so if the borrower doesn't make the payments as promised, the lender has the right to foreclose on the home and seize possession of it
Mortgages are a popular way for people to finance the purchase of a home or other large-ticket items.
Mortgage rates are important to households for several reasons:
Monthly Payments: Mortgage interest rates have a direct bearing on how much money borrowers must pay back each month. When interest rates are low, borrowers can obtain a cheaper interest rate, which makes monthly mortgage payments more manageable. On the other hand, higher rates raise the cost of borrowing, increasing the amount due each month.
Affordability: The cost of mortgages has an impact on housing affordability. Because they can qualify for higher loan amounts with reasonable monthly payments, lower rates make properties more accessible to a wider spectrum of potential buyers. Higher rates make a property less affordable, which makes it harder for some households to qualify for loans or to buy it.
Total Interest Paid: The amount of interest paid over the course of the loan is determined by mortgage rates. Less interest is paid when rates are lower, enabling borrowers to accumulate savings over time. Higher interest rates increase the overall cost of homeownership since borrowers will pay more in interest throughout the loan duration.
Refinancing Opportunities: The decision to refinance an existing mortgage is influenced by mortgage rates. When rates drop significantly, homeowners may choose to refinance their mortgage to secure a lower rate and potentially reduce monthly payments. Opportunities to save money or access home equity may be offered through refinancing.
Housing Market Activity: The entire health of the housing market is impacted by mortgage rates. Low interest rates increase demand since more purchasers can afford homes and obtain financing. Higher rates may cause the housing market to slack down, making it harder for prospective purchasers to enter the market and having an effect on home sales.
In summary, mortgage rates have a significant impact on the affordability of homes, monthly payments, total interest paid, refinancing decisions, and overall housing market activity, making them crucial for households when considering homeownership or managing existing mortgages.
QUOTES FROM THE SOURCES:
David Hollingworth from London & Country:
"The market has been experiencing relentless changes, prompting lenders to reprice deals as the market shifts."
"Borrowers seeking cheaper deals are facing a surge in demand."
"I expect more changes to occur this week but hope that rates will stabilize and the market will calm down soon."
Ian Stuart, CEO of HSBC UK:
"It's a deeply concerning time for a lot of customers."
"If you've got an old rate, as many will have, let's say 1.5%, and you're going to come off that rate and go onto something like 5%, that is a big impact on your monthly budget."
"We had to temporarily suspend [new mortgage deals] because of the overwhelming demand."
"I don't think inflation is going to fall quite as fast as we had hoped."
"The rising mortgage rates are also pressuring landlords, potentially leading some to consider selling their properties."